SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16424 / February 3, 2000
SEC Files Emergency Action in $1.5 Million Internet Trading Scheme
SECURITIES AND EXCHANGE COMMISSION v. NANCY J. CHEAL, individually and d/b/a RELIEF ENTERPRISE, et al. (United States District Court for the District of Massachusetts, C.A. No. 00 CV 10182-EFH) (January 31, 2000)
The Commission announced today the unsealing of a temporary restraining order and asset freeze against Nancy J. Cheal (ACheal@) based upon allegations that, directly and through representatives, she raised more than $1.5 million in a Prime Bank-like investment fraud perpetrated over the Internet and by other means. The Commission alleged that, since at least October 1999, Cheal, doing business as Relief Enterprise, fraudulently offered and sold investments in a Abank debenture trading@ program by making baseless promises of a 100% weekly return on a website and through other means of solicitation . According to the Complaint, Cheal also falsely told investors that the extraordinary investment return would be paid using the profits from the trading activity of a Alicensed bank debenture trader@ with whom she was purportedly associated. The Commission also alleged that Cheal or her representatives falsely assured investors that their funds were not at risk and were 100% guaranteed by the U.S. Government. The Commission alleged that the investment program had many of the hallmarks of so-called Prime Bank trading programs, which do not exist. According to the Complaint, Cheal, who allegedly conducted her operation from her mobile home in Bunnell, Florida, has obtained more than $1.5 million from hundreds of investors in forty-eight states and ten foreign countries. The Commission's complaint, which was filed on January 31, 2000, alleged that Cheal violated the general antifraud and securities registration provisions of the federal securities laws -- i.e., Sections 5(a) and (c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
According to the Commission, a substantial amount of the money raised from investors was deposited to a bank account controlled by Richard L. Birmingham (ABirmingham@), who used it to pay various expenses, including debit card withdrawals at a casino. The Commission charged Birmingham as a relief defendant, because he allegedly was unjustly enriched through his receipt of those funds from Cheal without consideration.
On February 1, 2000, the U.S. District Court for the District of Massachusetts granted the Commission's motion for an ex parte order temporarily restraining the fraudulent activities, freezing the assets of Cheal and Birmingham and the proceeds of the offering and imposing other equitable relief. A hearing on the Commission's motion for a preliminary injunction has been scheduled for February 15, 2000.
The Commission coordinated its investigation with the Office of the U.S. Attorney for the District of Massachusetts and the Federal Bureau of Investigation.